RISK TIP: PROMPTLY FORWARD SUMMONS AND PETITION.

Under the law, legal papers may be validly served on a company, corporation or partnership by delivering the legal papers to an officer, managing or general agent, or to any other agent authorized by appointment or by law to receive service of process. Problems arise when the person within a company upon whom valid service is made does not appreciate the importance of promptly sending the legal papers to the company’s insurer and attorney. One case that illustrates this point involved a summons and petition served on a regional vice-president of a company who failed to pass the papers along to the company’s insurer and attorney for handling. It was not until the sheriff seized the company’s local store to satisfy a default judgment entered against the company in the lawsuit, that the company’s risk manager first became aware of the matter. The risk manager then promptly referred the matter to the company’s insurer. The insurer denied liability due to untimely notice under the policy of insurance.

The risk manager argued that the knowledge-of-occurrence clause in the insurance policy resulted in a waiver of late notice. The insurance company took the position, however, that the duty to forward a summons and petition is a separate duty under the policy, and therefore the knowledge-of-occurrence clause did not apply. The court agreed with the insurer and the insurer was not required to defend or otherwise cover the insured loss giving rise to the lawsuit.

In addition to jeopardizing your company’s right to have its insurer defend and provide coverage for a covered loss, the failure to promptly respond to a lawsuit can lead to other devastating results. Under both federal and state law in Oklahoma, strict time limits apply to responding to a lawsuit. Unless a response is filed with the Court within the stipulated time, the opposing party may request and obtain a default judgment that it can then attempt to enforce without giving additional notice to the defaulting party. This risk can be substantially reduced or eliminated by promptly delivering a copy of the summons and petition to the company’s insurance company and attorney for further handling.

Steven K. Metcalf